With about 29% of Americans citing it as their favorite long-term investment, the real estate market continues to thrive across the US. While a lot of purchases are residential, others take the leap and reap the benefits of commercial property investment.
If you’re looking to become an investor in the commercial real estate market, it’s important that you understand the basics, benefits, and investment processes. Read on to learn how you can start investing in commercial real estate in Orange County, CA.
Why Invest in Commercial Real Estate?
Commercial real estate is a tangible investment. It physically exists and can appreciate or depreciate in value over time. Rather than having a value that companies assign to it as stocks do, tangible assets have intrinsic value in their own right.
Tangible assets like real estate are good because they have real-world applications. This increases the value because you and renters can consistently use it.
Portfolio Diversification
Diversifying your portfolio is important because all investments come with risks. If you make a stock market investment that doesn’t pay off, you could be out a lot of money.
But diversifying with real estate investments makes it more likely that one of your investments will pay off. That way, if one fails, you’ll still have income and returns to fall back on. You won’t lose all your money.
Commercial real estate investing is one way to add a new type of asset to your portfolio. It can coexist with stocks, bonds, and other tangible assets like precious metals. You can mitigate risk and reduce the probability of a stressful financial loss.
Passive Income
Investing in commercial real estate is a great way to generate income. You can rent it out to businesses that will pay you a monthly sum for its use. All you need to do is maintain the building with the terms that you outline in their leases.
It’s easier to get more passive income from commercial real estate than residential alternatives. For one thing, commercial properties are larger. If you buy an office building, you may be able to collect rent from several businesses that operate in different parts of the property.
You also will be able to have longer leases with commercial renters than residential ones. While most individual home renters will want 1-year leases at most, commercial leases usually last between 5-10 years. You won’t need to worry about vacant properties, turnover costs, and unpredictable cash flow.
High Investment Returns
It’s also easy to get a high ROI on a commercial investment. This is because they tend to appreciate in value more over time.
There are a lot of great renovations that you can make to commercial buildings, and you’ll have a lot of time to do this. Since leases are longer, you’ll be able to work while people are still using the building in most cases. You won’t need to schedule upgrades around when people are living in the building since they’re not residential.
This is convenient and also helps you justify raising business’s rents when their leases expire. You can also sell it for more money down the line when it’s time to let go of the investment.
Types of Commercial Property to Consider
There are several different types of commercial property available to you. Retail storefronts are great for those who want a venue that hosts a business. This is ideal for well-positioned properties that get a lot of foot traffic.
You also may rent out an office building. Many investors like this because they’ll have the option to collect rent from multiple businesses in one building.
Unlike a retail store where only one person would pay you rent, you’ll get a ton of passive income from multiple people. Note, though, that you will likely need to perform more maintenance on these spaces.
Industrial facilities and warehouse centers are also commercial property options for new investors. You can rent these out to multiple businesses with similar manufacturing and distribution needs.
Because these facilities tend to be large, they’ll require a lot of maintenance and routine inspections. However, since you’ll be collecting so much rent, it’s often worthwhile.
If you’re looking to become a big-time real estate investor, you might consider purchasing multiple types of property. It’s a great way to expand your portfolio. As a beginner, though, research the pros and cons of each to decide what your first investment should be.
How Can You Make the Right Commercial Property Investment?
Before you get started, look at what commercial properties are available to Orange County investors. Carefully research the demographics in the area of prospective purchases and how much competition you’ll have for rent and leasing.
Properties in high-traffic areas tend to cost more upfront, but you can charge higher rent to businesses that want visibility. Consider this as you compare rates and decide on a location that’s right for your objectives.
Get the Right Funding
There are a lot of loans available specifically for those investing in commercial real estate. Commercial bank loans are the most common, and you can get a nearly unlimited amount of financing assuming that the property meets the bank’s basic requirements.
They’ll look at your personal lending habits and credit score, but they’ll also afford you more based on whether the property has a high projected cash flow and ROI.
Become an Investor Today
Now that you know the basics of commercial property investment, it’s time to become an investor ASAP. Our experts are committed to helping people like you find high-value properties in Orange County, CA.
We’re excited to discuss your specific wants and needs, so contact us to learn more about the properties we have available for sale.
